With no event risk in sight for the US economic calendar, the dollar denominated majors were set in motion by fed talk and a disappointing showing from the weekly Redbook report. Range bound conditions were well in place by mid-day trading in the New York session.
The euro consolidated its range against the greenback as 1.28 support held up to swings higher that were capped at 35 points. For the USDJPY, a temporary spike higher to 118.30 was an the most action the pair could muster as a 30-point range above 117.90 support dominated price action. Range trade for the USDCHF set up profitable moves. A 45-point swing in the francs favor tallied the biggest move for the pair on the day and verified resistance at 1.2450. Finally, the GBPUSD was in an upward sloping, two-day old trend channel that has found a convincing top at 1.90.
With the economic calendar growing increasingly lighter as the week grinds along, it seems the big fundamental traders in the US and Japan are already starting to leave their desks for their respective Thursday holidays. While there were no headline grabbing indicators from the US today, there were a few events keeping the range traders on their game. The first event on the markets radar were comments made by Fed Governor Kevin Warsh. A voting member on the FOMC since February, Warsh spoke on market discipline at the NYSE. Summing up the contents of the entire speech, he said markets have shown a surprising degree of certainty regarding policy expectations taken at face value. Warsh was likely addressing Fed Fund futures pricing in a 50 basis point reduction in the benchmark lending rate by the end of 2007. Whether this was a caution to the financial markets or not, the Fed Governor went on to say that he believed inflation was still too high and that there are clear risks that wont the price relief will not come as quickly as investors expect. These are particularly interesting remarks when taken into context with last weeks drop in the closely monitored CPI. Warsh also broke rank on the overtly cautious and murky outlook for economic expansion when saying he expected US GDP to rebound from its poor third quarter performance.
While Fed commentary was starting to rouse a sleeping currency market, ever-present energy price fluctuations and the Redbook report were pushing the majors to the extremes of their modest ranges. Since the roll over to the nearby January crude oil contract on the NYMEX, the necessary commodity has made marked steps higher. On Friday, crude prices nearly hit $55 in intra-day lows. Now, only two business days later, the active month contract it just below $60, adding 1.5 percent today. Elsewhere, one of the few real time-specific indicators for the day was the report from the Johnson Redbook Service that tracks weekly same-store sales. Adding bearish sentiment stoked by rising energy prices, the Redbook reported monthly sales growth slowed to 0.2 in the week through November 21st. Spending has slipped markedly since October when four of the five weeks changes were 1.3 percent growth or more. As Black Friday in the US this week kicks off the holiday shopping season, markets will more closely monitor consumer spending habits to see if seasonality effects will help stimulate fourth quarter GDP.
Equities were tethered to the session open this morning as few broad market-moving economic releases left the top-market mover list thinly populated. Since 17:20 GMT, the S&P 500 index was leading stock market volatility with a modest 0.1 percent rise to 1,401.94. The Dow index added 0.05 percent to its bottom line to 12,322.71 while the Nasdaq Composite slipped 0.05 percent to 2,451.89. Though the broad market was not making any dramatic moves, a few companies were topping biggest movers list. Shares of Google topped the $500 mark to put in a new all-time high after the search engine giant announced shoppers using its payment system this holiday would receive discounts. Investors pushed Google shares $11.10 or 2.2 percent higher to $506.15. From the Dow 30, Boeing Co. was making waves after winning a 25-plane order from Korean Air worth $5.5 billion. Shares of Boeing advanced $2.31 or 2.6 percent to $91.42.
Treasuries were as inactive as equities and currencies Tuesday. Ten-year notes were up 1/32nd to 100-08 of face with yields unchanged at 4.593 by 17:20 GMT. Bonds were 3/32nds higher at 97-08 while its own yield slipped a basis point to 4.673.
